10 South Street sold to Polun for...

10 South Street sold to Polun for $530,000

Nelson Polun is the happiest real estate speculator in Baltimore, after trumping the field with a $530,000 bid at yesterday's auction of 10 South Street. The Class B office building went to auction after an inability to refinance debt forced its former owners into bankruptcy reorganization.


So why is Mr. Polun smiling? Because the building is 89 percent leased to government agencies like the city liquor board and the state's attorney's office.

According to information provided to bidders, the building has an annual rent roll of about $234,000 and expenses of a little more than $110,000.


"You don't have to be a rocket scientist to figure this out," said Mr. Polun, a stockbroker. "The return on my investment will be astronomical. It makes sense now, and it makes sense after the recession."

Even under former owners Wilbur E. Simmons and Peter Kirk, founders of KMS Group Inc. (a Baltimore Gas & Electric Co. unit now called Constellation Real Estate Inc.), the building's income could cover mortgage payments. But the Simmons/Kirk partnership that owned the building wasn't able to refinance the note when a balloon payment came due.

"Hopefully, the city will renew their leases with us," Mr. Polun said. "If they show any hesitation, I'll make them an offer they can't refuse."

Real estate market improves around D.C.

The folks at Smithy Braedon Co., the Washington-based commercial brokerage firm with ties to Baltimore, are taking issue with gloomy media reports about the commercial real estate market. In Washington's Maryland suburbs, at least, the real estate recovery has quietly begun.

"Suburban Maryland is showing some significant signs of life," Smithy Braedon vice president David A. DiNardo writes in the firm's new report on the state of metropolitan Washington's office market. "The market is already improving and will continue to do so long before the media and public opinion are 'on board.'

Trends for the next 12 months, he says: Large blocks of office space will become even more scarce, driving up prices. Prices for office buildings will stabilize as banks sell off the ones they have repossessed. And there will be more build-to-suit buildings for credit-worthy tenants, a trend already driving a big share of development in Baltimore.

But, like Baltimore, the suburban Washington market is being driven by government rather than the private sector. The two biggest office leases of the third quarter were made for the National Institutes of Health and the U.S. Department of Energy.


The biggest tenant on the horizon is the government, too. The U.S. General Services Administration is "in active negotiation for 350,000 square feet" -- as much space as any of several downtown Baltimore towers -- Mr. DiNardo writes.

Meanwhile, new buildings have virtually stopped coming on line. As modest demand has taken a bite out of the space on the market, suburban Maryland's office vacancy rate has fallen to 17 percent, from 18.1 percent a year ago.

Tightening in the market mainly affects large users, Mr. DiNardo says, noting the small number of available blocks of 50,000 square feet or more.

"Market transactions are as favorable as ever for tenants looking for 15,000 square feet or less."

Building permits' value down in area

Then again, the Baltimore Metropolitan Council's newly released portrait of Baltimore-area building permits for August is less than encouraging.


The dollar value of non-residential permits was down 39 percent in August, the council said. For all of 1992, the value is down 40 percent.

Baltimore City was the only local jurisdiction where the value of permits rose in August. Permits for work at the Lady Maryland Maritime Marina, the South Baltimore Family Health Center and the University of Maryland Medical Systems led the way.

"[City officials] are concentrated in the only areas growing," said Michael A. Conte, head of the Regional Economic Studies program at the University of Baltimore. "[The construction business] is basically dead except for life sciences and health generally."

Mr. Conte said that aside from government buildings, health facilities and tourist construction, he predicts little commercial building in the next three years.

The biggest declines in building permit values were in Baltimore County (down 74 percent year-to-date), Harford County (down 49 percent) and Howard County (down 43 percent). The smallest declines have been a 10 percent drop in Anne Arundel County and a 17 percent drop in Carroll County.

100 E. Pratt St. gets new tenants


The slow but steady leasing of one of Baltimore's most visible office buildings marched on as Sun Life Assurance Co. of Canada leased 2,105 square feet of space at 100 E. Pratt St.

L. Bruce Matthai, the W.C. Pinkard & Co. broker coordinating leasing of the 28-story building, said four other prospects have signed letters of intent to occupy another 20,000 square feet.

Those prospects would bring occupancy to about 79 percent at the building, he said. Mr. Matthai wouldn't name the prospects.

The building has followed a nearly two-year drought of tenant signings with a string of leases this summer and fall.

For a roundup of commercial leasing activity in Maryland, see Page 12E.